BDO mulls conversion of P5.341-billion loan into ACMDC equity

MANILA, Philippines - Atlas Consolidated Mining and Development Corp. has paved the way for the conversion of the SM Group’s Banco de Oro convertible loan of P5.341 billion into additional equity in the mining firm.

At its annual stockholders’ meeting yesterday at the Edsa Shangrila Hotel, ACMDC sought approval of a proposed deficit reduction plan that would allow the firm to wipe out its existing deficit if BDO decides to exercise its option to convert its P5.341 billion loan into equity in ACMDC at a price offer of P19.36 per share.

According to BDO chairperson and SM Investment Corp. vice chairperson Teresita Sy-Coson, who attended the ACMDC meeting yesterday, BDO is still “studying” the option even as she assured that the SM Group “supports” the move.

The SM Group’s current equity in ACMDC stands at 17.5 percent. If BDO decides to convert its loan into equity, the SM Group’s equity in ACMDC would increase to 35 percent, according to newly installed ACMDC director Jose Sio, SMIC chief financial officer.

Sio said the conversion of the loan would still have to be taken up by the board. He pointed out that mining is not a core business of the SM Group and is merely a “portfolio investment.”

The proposed deficit reduction plan will involve a reduction in the par value of ACMDC from P10 per share to P8 per share.

According to an industry analyst, the deficit reduction plan would eventually be good for ACMDC if BDO agrees to the loan conversion.

However, the issuance of the new shares, the analyst stressed would still result in a dilution of existing shares which ACMDC is hoping to counter with higher earnings per share should its deficit be wiped out and its generates more income from its full control of the Carmen Copper Corp. (CCC).

It was reported during the meeting that ACMDC posted a consolidated net income for the first three quarters of 2011 of P2.640 billion compared to just P47 million for the same period in 2010.

ACMDC’s improved financial performance was attributed to CCC which reported a net income of P2.599 billion for the first nine months of this year or 4.7 times its net income during the same period last year.

Atlas began consolidating 100 percent of CCC’s  results at  the  end of July  2011.        

The net income attributable to Atlas  as parent company for the first three quarter of 2011 amounted to P1.603 billion versus a net loss of P85 million for the same period  in 2010.